Korean Won Falls for Third Day as Iraq Unrest Curbs Risk-Taking

South Korea’s won weakened for a third day as escalating violence in Iraq sapped demand for riskier assets.

The Iraqi army attacked positions held by Sunni Muslim militants north of Baghdad last week to regain territory. The currency touched a one-week low after Bank of Korea Governor Lee Ju Yeol said in comments released yesterday that there’s less clarity whether economic growth will meet the central bank’s 4 percent forecast in 2014. Finance Minister nominee Choi Kyung Hwan said the economic recovery is slow, Yonhap News reported yesterday.

“The won is falling due to events in Iraq, but I don’t expect the trend to continue as many are waiting to sell dollars as the won weakens,” said Jahng Won, a Seoul-based currency trader for Shinhan Bank.

The won fell 0.2 percent to 1,019.90 per dollar at the close in Seoul, data compiled by Bloomberg show. It touched 1,020.35 earlier, the weakest level since June 5. The currency has strengthened more than 10 percent in the past year and touched 1,015.25 on June 10, the highest since August 2008.

Overseas investors sold $4 million more South Korean shares than they bought today, paring inflows this month to $395 million, exchange data show.

President Park Geun Hye is reshuffling her cabinet after criticism of the administration’s handling of a ferry disaster in April, which left at least 292 dead. The change in finance minister will not alter foreign-exchange policy, an official at the finance ministry said today, asking not to be named citing official policy.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 14 basis points, or 0.14 percentage point, 4.94 percent.

The yield on the 2.75 percent bonds due June 2017 declined two basis points to 2.73 percent in Seoul, Korea Exchange prices show. That’s the lowest level for a benchmark three-year note since May 2013. The 10-year yield increased one basis point to 3.32 percent.

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